Oil prices dent BP Chemicals
15 Jan 2000
The rising price of oil almost halved profits at BP Chemicals in 1996, although the same factor lifted the BP Group's profits to a record level.
BP Chemicals posted a pre-tax profit of £476million, compared with the previous year's record £854million figure. This year's result, on turnover down by a fifth to £3.5billion, was `satisfactory,' he said, as return on capital employed after tax was 17 per cent, two percentage points above the 15 per cent target across the cycle.
In terms of the US dollar, which dictates oil prices, profits fell from $1.35billion to $743million. Of this, $765million was due to pressure on margins, caused by the high oil price. Costs were down by $10million, while volumes were up by $121million. `Self-help' measures saved the company some $600million in 1996, said chief executive Bryan Sanderson, who expects similar savings next year.
The next big move for BP Chemicals may be a joint venture with Hoechst's high-density polyethylene business. Talks are underway between the two companies, Mike Buzzacott, head of polymers and olefins, confirmed, and have now reached the stage of valuing the assets of the two businesses. Hoechst is seeking the link-up as part of its massive restructuring; the companies already collaborate over development and production of pipe-grade hdPE from plants in Grangemouth and Frankfurt. Buzzacott expects the negotiations to conclude within the next month.
In another part of the business, Hoechst is proving to be a thorn in BP's side. The High Court has found that BP Chemicals is infringing a patent held by Hoechst Celanese, the US division, for part of the acetic acid production process. The technology, which removes contaminants from the product stream, is now obsolete and is only in use at one plant in Hull, Sanderson said. Damages have not yet been decided, he added, but BP has already decided to appeal.
